IDEAS home Printed from https://ideas.repec.org/p/col/000122/012663.html
   My bibliography  Save this paper

Class or location? What explains the rising tide of absolute global income inequality during 1850-2010?

Author

Listed:
  • Thomas Goda
  • Alejandro Torres

Abstract

This paper is the first to decompose absolute global income inequality into its within-country class and between-country location components. The estimates show that until 1970 locational income differences were the main driver of absolute global inequality, whereas its recent growth can be explained primarily by class differences. Nowadays, inequality between classes explains 70% of absolute global market inequality. Additional findings are that absolute income convergence between countries took place after 2005, that it is possible to reduce absolute inequality and to grow at the same time, and that of late within countries net inequality was growing faster than market inequality.

Suggested Citation

  • Thomas Goda & Alejandro Torres, 2015. "Class or location? What explains the rising tide of absolute global income inequality during 1850-2010?," Documentos de Trabajo de Valor Público 12663, Universidad EAFIT.
    • Handle: RePEc:col:000122:012663
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10784/5131
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Thomas Piketty, 2015. "Putting Distribution Back at the Center of Economics: Reflections on Capital in the Twenty-First Century," Journal of Economic Perspectives, American Economic Association, vol. 29(1), pages 67-88, Winter.
    2. François Bourguignon & Christian Morrisson, 2002. "Inequality Among World Citizens: 1820-1992," American Economic Review, American Economic Association, vol. 92(4), pages 727-744, September.
    3. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
    4. Amiel,Yoram & Cowell,Frank, 1999. "Thinking about Inequality," Cambridge Books, Cambridge University Press, number 9780521466967, September.
    5. Clare Leaver & Paul Segal, 2014. "The Global Distribution of Income," Economics Series Working Papers 714, University of Oxford, Department of Economics.
    6. Kristof Bosmans & Koen Decancq & André Decoster, 2014. "The Relativity of Decreasing Inequality Between Countries," Economica, London School of Economics and Political Science, vol. 81(322), pages 276-292, April.
    7. Daniel Halter & Manuel Oechslin & Josef Zweimüller, 2014. "Inequality and growth: the neglected time dimension," Journal of Economic Growth, Springer, vol. 19(1), pages 81-104, March.
    8. Joan Esteban & Debraj Ray, 2006. "Inequality, Lobbying, and Resource Allocation," American Economic Review, American Economic Association, vol. 96(1), pages 257-279, March.
    9. Satya Chakravarty, 2001. "The Variance as a subgroup decomposable measure of inequality," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 53(1), pages 79-95, January.
    10. Satya Chakravarty & Swami Tyagarupananda, 2009. "The subgroup decomposable intermediate indices of inequality," Spanish Economic Review, Springer;Spanish Economic Association, vol. 11(2), pages 83-97, June.
    11. Herzer, Dierk & Vollmer, Sebastian, 2013. "Rising top incomes do not raise the tide," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 504-519.
    12. Jan Luiten van Zanden & Joerg Baten & Peter Foldvari & Bas van Leeuwen, 2011. "The Changing Shape of Global Inequality - exploring a new dataset," Working Papers 0001, Utrecht University, Centre for Global Economic History.
    13. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
    14. Branko Milanovic, 2013. "Global Income Inequality in Numbers: in History and Now," Global Policy, London School of Economics and Political Science, vol. 4(2), pages 198-208, May.
    15. Xavier Sala-i-Martin, 2006. "The World Distribution of Income: Falling Poverty and … Convergence, Period," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 351-397.
    16. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    17. Jan Luiten Zanden & Joerg Baten & Peter Foldvari & Bas Leeuwen, 2014. "The Changing Shape of Global Inequality 1820–2000; Exploring a New Dataset," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(2), pages 279-297, June.
    18. Angus Deaton & Alan Heston, 2010. "Understanding PPPs and PPP-Based National Accounts," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 1-35, October.
    19. Thomas Goda & Photis Lysandrou, 2014. "The contribution of wealth concentration to the subprime crisis: a quantitative estimation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(2), pages 301-327.
    20. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," LIS Working papers 496, LIS Cross-National Data Center in Luxembourg.
    21. Thomas Goda, 2013. "Changes in income inequality from a global perspective: An overview," Working Papers PKWP1303, Post Keynesian Economics Society (PKES).
    22. Harrison, Elizabeth & Seidl, Christian, 1994. "Perceptional Inequality and Preferential Judgements: An Empirical Examination of Distributional Axioms," Public Choice, Springer, vol. 79(1-2), pages 61-81, April.
    23. Sen, Amartya, 2000. "Social justice and the distribution of income," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 1, pages 59-85, Elsevier.
    24. Ehrlich, Isaac, 1973. "Participation in Illegitimate Activities: A Theoretical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 521-565, May-June.
    25. Peter Svedberg, 2004. "World Income Distribution: Which Way?," Journal of Development Studies, Taylor & Francis Journals, vol. 40(5), pages 1-32.
    26. Dierk Herzer & Sebastian Vollmer, 2012. "Inequality and growth: evidence from panel cointegration," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(4), pages 489-503, December.
    27. Angus Deaton & Bettina Aten, 2017. "Trying to Understand the PPPs in ICP 2011: Why Are the Results So Different?," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(1), pages 243-264, January.
    28. Özlem Onaran & Giorgos Galanis, 2014. "Income Distribution and Growth: A Global Model," Environment and Planning A, , vol. 46(10), pages 2489-2513, October.
    29. Maxim Pinkovskiy & Xavier Sala-i-Martin, 2009. "Parametric Estimations of the World Distribution of Income," NBER Working Papers 15433, National Bureau of Economic Research, Inc.
    30. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242, June.
    31. repec:hal:pseose:halshs-01207273 is not listed on IDEAS
    32. Oechslin, Manuel & Halter, David, 2010. "Inequality and Growth: The Neglected Time Dimension," CEPR Discussion Papers 8033, C.E.P.R. Discussion Papers.
    33. Sudhir Anand & Paul Segal, 2008. "What Do We Know about Global Income Inequality?," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 57-94, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Goda & Alejandro Torres García, 2017. "The Rising Tide of Absolute Global Income Inequality During 1850–2010: Is It Driven by Inequality Within or Between Countries?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(3), pages 1051-1072, February.
    2. Facundo Alvaredo & Leonardo Gasparini, 2013. "Recent Trends in Inequality and Poverty in Developing Countries," CEDLAS, Working Papers 0151, CEDLAS, Universidad Nacional de La Plata.
    3. Paolo Liberati, 2015. "The World Distribution of Income And Its Inequality, 1970–2009," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(2), pages 248-273, June.
    4. Thomas Goda & Santiago Sanchez, 2018. "Market and Disposable Top Income Shares adjusted by National Accounts Data," Journal of Income Distribution, Ad libros publications inc., vol. 26(2), pages 1-22, July.
    5. Thomas Goda, 2013. "Changes in income inequality from a global perspective: An overview," Working Papers PKWP1303, Post Keynesian Economics Society (PKES).
    6. Moatsos, Michail, 2020. "Global Absolute Poverty: The Evolution of its Measurement," EconStor Preprints 216642, ZBW - Leibniz Information Centre for Economics.
    7. Roope, Laurence & Niño-Zarazúa, Miguel & Tarp, Finn, 2018. "How polarized is the global income distribution?," Economics Letters, Elsevier, vol. 167(C), pages 86-89.
    8. Moatsos Michail, 2016. "Global Absolute Poverty: Behind the Veil of Dollars," Journal of Globalization and Development, De Gruyter, vol. 7(2), pages 1-28, December.
    9. Dávila-Fernández, Marwil J. & Punzo, Lionello F., 2021. "The Kuznets curve of the rich," Economic Systems, Elsevier, vol. 45(4).
    10. Anthony Shorrocks & James Davies, 2018. "Comparing global inequality of income and wealth," WIDER Working Paper Series 160, World Institute for Development Economic Research (UNU-WIDER).
    11. Jan Luiten Zanden & Joerg Baten & Peter Foldvari & Bas Leeuwen, 2014. "The Changing Shape of Global Inequality 1820–2000; Exploring a New Dataset," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(2), pages 279-297, June.
    12. Seher Gülşah Topuz, 2022. "The Relationship Between Income Inequality and Economic Growth: Are Transmission Channels Effective?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(3), pages 1177-1231, August.
    13. Anthony B. Atkinson & Andrea Brandolini, 2010. "On Analyzing the World Distribution of Income," The World Bank Economic Review, World Bank, vol. 24(1), pages 1-37, January.
    14. Andros Kourtellos & Charalambos G. Tsangarides, 2022. "Robust Correlates of Growth Spells: Do Inequality and Redistribution Matter?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(6), pages 1302-1328, December.
    15. Gründler, Klaus & Krieger, Tommy, 2016. "Democracy and growth: Evidence from a machine learning indicator," European Journal of Political Economy, Elsevier, vol. 45(S), pages 85-107.
    16. Roope, Laurence & Niño-Zarazúa, Miguel & Tarp, Finn, 2018. "How polarized is the global income distribution?," Economics Letters, Elsevier, vol. 167(C), pages 86-89.
    17. Andrew J. Hussey & Michael Jetter & Dianne McWilliam, 2021. "The Fundamental Determinants of Economic Inequality in Average Income Across Countries: The Declining Role of Political Institutions," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(1), pages 104-133, March.
    18. Ọláyínká Oyèkọ́lá, 2024. "Life may be unfair, but do democracies make it any less burdensome?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 22(3), pages 577-602, September.
    19. Chletsos Michael & Roupakias Stelios, 2020. "The effect of military spending on income inequality: evidence from NATO countries," Empirical Economics, Springer, vol. 58(3), pages 1305-1337, March.
    20. Gründler, Klaus & Scheuermeyer, Philipp, 2015. "Income inequality, economic growth, and the effect of redistribution," W.E.P. - Würzburg Economic Papers 95, University of Würzburg, Department of Economics.

    More about this item

    Keywords

    absolute inequality; personal income distribution; global inequality; withincountry inequality; between-country inequality; class;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:col:000122:012663. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Valor Público EAFIT - Centro de estudios e incidencia (email available below). General contact details of provider: https://edirc.repec.org/data/cieafco.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.